WASHINGTON, Feb 7 (Reuters) - Senior U.S. Justice Department officials are weighing whether to drop a major case that involved a sting operation to try to catch executives paying bribes to win lucrative contracts for military equipment, a prosecutor said on Tuesday.

The case encountered several setbacks along the way. U.S. authorities arrested 22 people two years ago and accused them collectively of trying to bribe two men who posed as representatives of Gabon's defense ministry to win $15 million in deals to provide guns, body armor and other equipment. The representatives were actually FBI agents.

The case was broken into several trials, however. Two have ended in mistrials and three individuals have been acquitted. Three others caught in the undercover operation and a fourth man tied to the group have already pleaded guilty.

The head of the agency's criminal division, Lanny Breuer, and U.S. Attorney for the District of Columbia Ronald Machen are evaluating "whether to continue to go forward" with the case, prosecutor Joseph Lipton told U.S. District Judge Richard Leon on Tuesday.

At Lipton's request, Leon agreed to a two-week delay for Breuer and Machen to make a decision, giving them until Feb. 21. The third trial was supposed to begin at the end of the month.

The Justice Department could also decide to proceed with the case - including retrying those involved in the mistrials - or try to seek plea agreements.

The group has been charged with conspiracy and for violating the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits the payment of bribes to foreign officials in order to secure business contracts.

However, in the last trial, which lasted more than two months, Judge Leon threw out the conspiracy charge.

The FCPA case was seen as groundbreaking at the time it was unsealed because it was the first time prosecutors had used a sting operation on such a large scale in a bribery case.

During the two-and-a-half-year investigation, which involved some 250 FBI agents, the arms sales representatives were told they would have to add a 20 percent commission to their price quotes, which would essentially serve as bribes.

Those who were arrested included a former U.S. Secret Service agent. He was acquitted last week.

The case is USA v. Goncalves et al, No. 09-cr-335, in U.S. District Court for the District of Columbia.

For the USA: Glenn Leon, Joey Lipton, laura Perkins and Matthew Solomon of the U.S. Department of Justice, Harold Walther of Jones Day and Jonathan Haray, Matthew Graves and Seth Waxman of the U.S. Attorney's Office.

For Goncalves: Charles Leeper of Drinker Biddle & Reath and John Matson III, Jeremy Margolis and Robert Andalman of Loeb & Loeb.

(Reporting By Jeremy Pelofsky)

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